Aurora lamenting condo-minimums

In the last several years it has been rare to see a multi-family project go up, aside from the region’s explosion of apartments. Developers have mostly stopped building condos and townhouses because it’s hard to keep them on the lower end of the cost spectrum, they say. And while there isn’t a shortage of reasons why, there’s one that everybody goes straight to: construction defect laws.

AURORA | Aurora has more land to build on than other parts of the Denver metro area, so whatever goes up, Associated General Contractors CEO Michael Gifford said Aurora is going to get a lot of it.

For the past few years, that has not been condos. And that trend may continue for a while, he said. Builders still see those projects as risky, Gifford said in an interview.

In the last several years it has been rare to see a multi-family project go up, aside from the region’s explosion of apartments. Developers have mostly stopped building condos and townhouses because it’s hard to keep them on the lower end of the cost spectrum, they say. And while there isn’t a shortage of reasons why, there’s one that everybody goes straight to: construction defect laws.

Only about 7 percent of what’s being built right now are condos and townhomes, he said. The rest are single-family homes or apartments. Now, things are looking a little better. Gifford said that 7 percent number is up from between 2 and 3 percent in recent years.

But Aurora lawmakers, or at least some of them, want to see more construct defect law reforms made to encourage more of those units that are so far hard to come by. Last week Aurora City Council passed a resolution that urges state lawmakers to create legislation that would require defect claims to go through an arbitration or mediation process before litigation.

The argument goes that developers can’t build more affordable for-sale housing because insurance prices to build condos and townhomes are driving up the price. Developers say insurance prices are so high because it’s relatively easy for a homeowners association to launch a lawsuit over some sort of construction defect.

State lawmakers battled over the topic last year. Gov. John Hickenlooper eventually signed House Bill 1279, which requires the majority of a condo or townhome complex to agree to legal action rather than just a majority of the HOA board when it comes to faulty construction.

But Councilman Bob Roth, who was behind the resolution, doesn’t think that’s been enough. He’s been in construction for more than 30 years and currently owns a consulting business in the industry.

“This (insurance costs) is absolutely the issue, not just one of the issues,” Roth said.

He said a required arbitration system could lead to more affordable housing, which the region is in desperate need of. Gifford said two-bedroom two-bathroom condos, on average, go for just more than $400,000. Something more manageable would be on the lower end of $300,000, he added.

What’s helped nudge up condo building projects more than legislation, Gifford said, is a case decided by the Colorado Supreme Court last summer that said a homeowners association can’t disregard bylaws that require arbitration in cases of construction defects.

“It’s helped,” he said. But it’s not been enough time to convince insurance companies to lower rates. That’ll come in maybe three or four years, Gifford added.

In 2015, Aurora City Council passed an ordinance after a year of failed battles at the statehouse. The Sentinel previously reported that the rules give builders the right to repair defects prior to the pursuit of a lawsuit, requires that the majority of home owners in a home owners association — as opposed to just a majority of HOA board members — approve of any lawsuits, and allows builders to offer monetary settlements to homeowners in lieu of repairs.

Former Aurora state Sen. Morgan Carroll, who now heads the state Democratic Party, and others have specifically fought against forced arbitration and other proposed construction defect legislation. She previously told the Sentinel city officials shouldn’t have the ability to trump the rights of citizens.

Jonathan Harris, head of Build Our Homes Right, told several news outlets he’s fighting against forced arbitration because builders should have to stand behind their products.

Some members of council wanted to wait before urging the legislature to take more action on the issue. Johnston said she wants to make sure consumers are protected and that it may be too early to tell whether current laws are working.

But Gifford said building is happening, and in Aurora it’s happening fast, particularly along the R-Line, where there seems to be a plethora of apartment projects, but few dwellings for sale.

“Some people in the business and elected leaders have expressed nervous concern about those transit stops and all those apartments going up,” Gifford said. “You only get one chance.”

Now, it’s too late in the legislative session for lawmakers to take up what the council is urging, and it’s unclear what bills will be heard next year. Gifford, who supports the legislature continuing its work on construction defects, said he isn’t aware of anything so far.